Does Making Tax Digital affect CIS?

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Making Tax Digital (MTD) definitely affects you if you are a self-employed subcontractor under the Construction Industry Scheme (CIS).

While it doesn’t change how your contractor takes tax off your pay (the 20% or 30% deduction), it completely changes how you report that income to HMRC. Instead of sending one tax return at the end of the year, you will soon have to send updates every three months using software.

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What is changing for CIS workers?

Currently, most CIS subcontractors keep their records (like invoices and receipts) and send a single Self Assessment tax return once a year.

Under the new “Making Tax Digital for Income Tax” rules, the “once-a-year” habit is ending. You will be required to:

1. Keep digital records: You can no longer use a paper diary or a shoebox of receipts. You must use an app or software to log your income and expenses.
2. Send quarterly updates: Every three months, you (or your accountant) must send a digital summary of your business income and expenses to HMRC.
3. Submit a Final Declaration: At the end of the tax year, you’ll do a final check to confirm your figures and claim any tax overpaid (your CIS refund).

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When do I need to start?

Not everyone has to switch at the same time. It depends on your “qualifying income” (your total turnover before any tax or expenses are taken off).

If you earn over…	You must start MTD from…
£50,000	April 2026 (Right Now)
£30,000	April 2027
£20,000	April 2028

Note: If you are a subcontractor working through a Limited Company, these specific MTD rules do not apply to you yet. They only apply to sole traders and landlords.

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What stays the same?

It is important to remember that MTD is about reporting, not about how much tax you pay.

• CIS Deductions: Your contractor will still deduct 20% (or 30%) from your labor and pay it to HMRC on your behalf.
• The 31 January Deadline: You still have until the end of January to pay any remaining tax or “finish” your tax year, but the information will have already been sent to HMRC throughout the year.
• Materials: You still don’t pay CIS tax on the cost of materials, as long as they are listed separately on your invoice.

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How to get ready

If you are in the first group (earning over £50k), you need to act now.

• Get the right software: You cannot use the old HMRC website to type in your numbers anymore. You need “MTD-compatible” software. Many apps are designed specifically for tradespeople and allow you to snap photos of receipts on-site.
• Check your “Gross” pay: Remember, the £50,000 limit is based on your total invoice amount before the contractor takes the 20% off.
• Separate your bank accounts: If you haven’t already, use a separate bank account for your work. It makes digital record-keeping much easier because the software can “talk” directly to your bank.

Summary

The transition to Making Tax Digital is the biggest change to the tax system in decades. For CIS workers, it means being more organized throughout the year rather than having a “January panic.” If you stay on top of your digital records every week, the quarterly updates should only take a few minutes.

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